NZD/USD Will Decline Throughout the Year - Westpac
Imre Speizer, Senior Market Strategist at Westpac, notes that the
NZD/USD was rescued from a breakdown by the RBNZ’s hawkish surprise last
Thursday.
Key Quotes
“Its failure to
signal a June cut (which would have taken the language form “further
easing is likely”) caused an exit from speculative short NZD positions.
Further strength during the week ahead is likely and 0.7000 should be
retested.
On Wed we have the NZ Q1 labour data. The previous
quarter’s unusually large drop in unemployment (6.0% to 5.3%) is at risk
of partially correcting. That will be an important input into RBNZ
monetary policy thinking, especially following last week’s slightly
hawkish shift in stance. Also out this week is the April QV housing
report (also Wed), and there’s the first of the month’s two GDT dairy
auctions (on Tue). Futures markets are predicting another moderate rise
in WMP prices, which should be NZD-supportive
Watch too for the market-moving US April payrolls data on Fri.
3 months:
We retain our long-held view that NZD/USD will decline throughout the
year, but we have raised our mid-year target to 0.65. The basis for our
view remains a combination of a lower OCR and better US economic data.
Admittedly, we have been surprised by the degree of skepticism regarding
the Fed’s tightening cycle which has resulted in a sharp decline in the
US dollar. And there is a risk that the Fed will be more hesitant than
we expect. However, we note that in Q1 2015 a similar degree of
skepticism eroded once the US data pulse improved in Q2.”
